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Tax Notes

Revised rules in the determination of fair market value of unlisted shares

THE Bureau of Internal Revenue has issued Revenue Regulation 20-2020 on Aug. 18, 2020 to all those concerned regarding the transactions for sale, barter or exchange of shares not traded though the local stock exchange, the fair market value of shares of stocks to be determined as follows:

Common shares - the book value of common shares on the latest available financial statements duly certified by an independent Certified Public Accountant prior to the date of sale but not earlier than the immediately preceding year. Adjusted net asset method is no longer applicable.

Preferred shares - liquidation value, which is equal to the redemption price of the shares as of the balance sheet date nearest to the transaction date, including any premium and cumulative preferred dividends in arrears.

In case there are both common and preferred shares, the book value per common share is computed by deducting the liquidation value of the preferred shares from the total equity of the corporation.

In view of the new rules, appraisal of the real properties of the investee company is no longer required.

The revenue regulations shall be effective after 15 days following its publication.

Please be guided accordingly.


P&A Grant Thornton

Certified Public Accountants


As published in SunStar Cebu, dated 26 August 2020